L0 percent coupon bond sells at par. Two years from now, the required retur is 8 percent. What is the coupon rate on the bond? What is the YTM on the

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 10P
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explain your process.
1. Suppose today a 10 percent coupon bond sells at par. Two years from now, the required return
on the same bond is 8 percent. What is the coupon rate on the bond? What is the YTM on the
bond?
2. Vinya Inc. has 7.5 percent coupon bonds on the market that have 10 years left to maturity. The
bonds make annual payments. If the YTM on these bonds is 8.75 percent, what is the current
bond price? Assume the par value of a bond is $1,000. Do not round intermediate calculations
and round your final answer to 2 decimal places.
3. Popie Drink Corp issued 12 year bonds 2 years ago at a coupon rate of 8.4 percent. The bonds
make semi-annual payments. If these bonds currently sell for 105 percent of par value, what is
the YTM? Assume the par value of a bond is $1,000. Do not round intermediate calculations
and round your final answer to 2 decimal places.
4. Treasury bills are currently paying 7 percent and the inflation rate is 3.8 percent. What is the
approximate real rate of interest? What is the exact real rate? Round your answer to 2 decimal
places.
5. An investment offers a 14 percent total return over the coming year. Tom Jones thinks the total
real return on the investment will be only 9 percent. What does Tom believe the inflation rate
will be over the next year? Do not round intermediate calculations and round your final answer
to 2 decimal places.
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Transcribed Image Text:explain your process. 1. Suppose today a 10 percent coupon bond sells at par. Two years from now, the required return on the same bond is 8 percent. What is the coupon rate on the bond? What is the YTM on the bond? 2. Vinya Inc. has 7.5 percent coupon bonds on the market that have 10 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 8.75 percent, what is the current bond price? Assume the par value of a bond is $1,000. Do not round intermediate calculations and round your final answer to 2 decimal places. 3. Popie Drink Corp issued 12 year bonds 2 years ago at a coupon rate of 8.4 percent. The bonds make semi-annual payments. If these bonds currently sell for 105 percent of par value, what is the YTM? Assume the par value of a bond is $1,000. Do not round intermediate calculations and round your final answer to 2 decimal places. 4. Treasury bills are currently paying 7 percent and the inflation rate is 3.8 percent. What is the approximate real rate of interest? What is the exact real rate? Round your answer to 2 decimal places. 5. An investment offers a 14 percent total return over the coming year. Tom Jones thinks the total real return on the investment will be only 9 percent. What does Tom believe the inflation rate will be over the next year? Do not round intermediate calculations and round your final answer to 2 decimal places. 1 of 16 Next > 108% PDF
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